The Trump administration announced on Tuesday it will end a temporary subsidy program that helped reduce monthly premiums for Medicare Part D prescription drug plans, a move that could lead to higher costs for millions of older Americans in 2027. The program, initiated under the Biden administration, provided billions of dollars to insurers over the past two years to keep drug coverage premiums lower amid changes brought by the Inflation Reduction Act of 2022.
The subsidy had been designed to offset premium increases stemming from new Medicare provisions, including a $2,000 annual cap on out-of-pocket drug spending. According to nonprofit health policy organization KFF, the government spent approximately $3.6 billion on the subsidy in 2026, benefiting roughly 25 million people enrolled in standalone Part D plans—those separate from Medicare Advantage—and an additional 31 million beneficiaries who receive drug coverage through Medicare Advantage.
Centers for Medicare & Medicaid Services (CMS) Administrator Dr. Mehmet Oz announced the decision via social media, stating the subsidies were no longer necessary as insurers now had sufficient data to project costs accurately. He projected that premiums would rise by less than $10 for most beneficiaries and suggested some may even see lower premiums, emphasizing that affordable plan options would remain available. Dr. Oz criticized the previous administration’s approach, calling it “unacceptable” for allocating “billions of taxpayer dollars directly to Big Insurance Companies.”
However, uncertainty remains about the exact impact on individual premiums. Experts note that the loss of subsidies does not directly equate to an equivalent premium increase, as insurers consider multiple factors when setting prices. Juliette Cubanski, Medicare policy director at KFF, warned that some beneficiaries may face notably higher costs, potentially prompting more to switch to Medicare Advantage plans, where drug coverage premiums tend to be lower.
The announcement drew swift political responses. Democratic officials and health advocacy groups criticized the administration’s move, arguing it would make medications less affordable for seniors. Kendall Witmer of the Democratic National Committee accused Republicans of undermining healthcare affordability, while Leslie Dach, chair of Protect Our Care, called the subsidy’s elimination “a key program that helps seniors afford their medications.”
Industry groups offered cautious reactions. AHIP, a major trade organization representing insurers, said it was reviewing the decision and reiterated its focus on maintaining affordable Part D benefits amid rising prescription drug prices. UnitedHealthcare, a large Part D plan provider, said the subsidy’s end was anticipated and pledged to collaborate with CMS to ensure continued access to affordable medications.
Premium rates for individual Part D plans are expected to be released by CMS in September, ahead of the annual enrollment period. While average monthly premiums for standalone Part D drug coverage were about $36 in 2026, the exact changes for 2027 will depend on a range of market and regulatory factors. Beneficiaries will have the opportunity to review and select plans during the fall open enrollment.